How much to save for kids' college? And what about life insurance?

[asmom]

Every month I deposit a large chunk of money into my kids' 529, but lately I've been rethinking my decision. I do intend to offer them some financial assistance with their college but I wonder if they would be more motivated if they had to work a little for it? In other words, instead of me paying 100% of the bill, why shouldn't I pay only say for instance, 70%? Why shouldn't they work for scholarships and try to get a part-time job or something to help themselves along? I don't want them to graduate with huge student loans but I think they should contribute something even if I am able to pay for all of it. What are your thoughts about this?


The same goes for life insurance. I only have about $100,000 in life insurance which doubles if I die accidentally. I think that's more than enough for my husband to bury me and sustain the household for a few years after I'm gone especially since I will be also leaving him my savings and investments. I'm not trying to make him a rich man so he will be more appealing to his next wife. I'm curious as to what others think about this.

[cschin4]

I looked into 529 but decided against it. I really don't have any funds specifically earmarked for my kids. I have retirement plans, stocks, and mutual funds. I just contribute to those and we will assess what is available when the time comes. I have 3 kids so I just don't see where I could fund 3 separate accounts every month. I am sure they will have to take on some loans and/or apply for scholarships when the time comes.

[poundwise]

Originally Posted by asmom

Every month I deposit a large chunk of money into my kids' 529, but lately I've been rethinking my decision. I do intend to offer them some financial assistance with their college but I wonder if they would be more motivated if they had to work a little for it? In other words, instead of me paying 100% of the bill, why shouldn't I pay only say for instance, 70%? Why shouldn't they work for scholarships and try to get a part-time job or something to help themselves along? I don't want them to graduate with huge student loans but I think they should contribute something even if I am able to pay for all of it. What are your thoughts about this?

What about if you had them contribute themselves? That is, if they are paid from chores or given an allowance, etc. Have them put a certain percentage back to go into their own 529. Certainly, you'd still be putting the bulk in, but percentage-wise, they could be doing just as much or more. This will especially be something they can see, and learn the value of, when they get older (i.e. - in high school) and have part-time/summer job(s).

[poundwise]

Another idea, let the child put themselves through 2 years of school at a Community College. If they do well then pay for the next 2 years when they transfer to a 4 year (and much more expensive) institution.

A high school student with a job can put back some money for school, then continue working while attending a community college, to put themselves through that way... especially knowing that once they have done so they will get the bulk of their education paid for by another.

In this plan, or a variation on it, you will not have paid the whole bill, they will learn the value of the education, and they will not come out of school with the burden of student loan payments.

[Elgin526]

I'm a big believer in insurance. You may think $100,000 is enough (and it coudl be), but if you work, remember that your husband would lose your income while all the bills stay the same. Can he afford the mortgage just on his income? Car payment? Utilities and groceries?

Plus he'd have to keep working himself and, unless your kids were in highschool at the time of your death, he'd most likely have to get some sort of child care for when they are home and he's at work. Not just before and after school, but school breaks and summer vacations. Can he cook and clean? Even if he can, if he's working full time with no help at home, he may have to hire a cleaning service and/or get a lot of take out or more expensive convienance foods.

Depending on your current spending and income, your husband could go through the $100,000 in two years. And maybe that's all you feel you need, that's fine too! Just make sure you have the whole picture

But another thing to consider is that the worst possible senario for a family is not one of the spouses dieing. It's one of them becoming disabled, not being able to work, and maybe even needing nursing care on top of whatever medical bills there were from the disability to begin with. If you're disabled, you don't collect the life insurance, but have many of the same problems as if you had died (loss of income, primarily) Do you both have short and long term disability insurance? The fact is that otherwise healthy adults are more likely to become disabled than die young.

Sorry to be such a bummer, but sit down and really look at the effect of your dieing will have, then look at the effect of one of you becoming disabled. Then decide if you need more insurance.

As for college savings, no advice there, I don't have kids yet!

[Joan.of.the.Arch]

Elgin, I really appreciate your advice to consider disability insurance. I needed the reminder.

[asmom]

Originally Posted by Elgin526

I'm a big believer in insurance. You may think $100,000 is enough (and it coudl be), but if you work, remember that your husband would lose your income while all the bills stay the same. Can he afford the mortgage just on his income? Car payment? Utilities and groceries?

Plus he'd have to keep working himself and, unless your kids were in highschool at the time of your death, he'd most likely have to get some sort of child care for when they are home and he's at work. Not just before and after school, but school breaks and summer vacations. Can he cook and clean? Even if he can, if he's working full time with no help at home, he may have to hire a cleaning service and/or get a lot of take out or more expensive convienance foods.

Depending on your current spending and income, your husband could go through the $100,000 in two years. And maybe that's all you feel you need, that's fine too! Just make sure you have the whole picture

But another thing to consider is that the worst possible senario for a family is not one of the spouses dieing. It's one of them becoming disabled, not being able to work, and maybe even needing nursing care on top of whatever medical bills there were from the disability to begin with. If you're disabled, you don't collect the life insurance, but have many of the same problems as if you had died (loss of income, primarily) Do you both have short and long term disability insurance? The fact is that otherwise healthy adults are more likely to become disabled than die young.

Sorry to be such a bummer, but sit down and really look at the effect of your dieing will have, then look at the effect of one of you becoming disabled. Then decide if you need more insurance.

As for college savings, no advice there, I don't have kids yet!

wow! That is an eye opener, I never even thought about it like that. I am going to have to reconsider some things. Thanks for your thoughts.

[asmom]

Originally Posted by poundwise

What about if you had them contribute themselves? That is, if they are paid from chores or given an allowance, etc. Have them put a certain percentage back to go into their own 529. Certainly, you'd still be putting the bulk in, but percentage-wise, they could be doing just as much or more. This will especially be something they can see, and learn the value of, when they get older (i.e. - in high school) and have part-time/summer job(s).

I really like this idea. Currently, they spend most of their allowance on foolishness and I don't know why I hadn't thought to make them save a portion of it. It would be teaching them a good habit also.

[dollargal]

Parents worries are mostly concerned with the budget for children, which involves lots of expenses towards education. My sister took loans to send her children abroad for tertiary education, which is a very big expenditure. For the college purpose, there's atleast 1/4 of salary which goes..transport, stationery, books, food.. it's hard to be parenting sometimes!

[TBH]

I've been thinking about this, too. My goal is to have enough saved when my only child starts college to pay for 2 years. The other 2 years--we'll figure something out. I think we'll probably sit down and work out a balance for the last two years. I envision something like this:

25%: His dad and I pay out of pocket
25%: Our son pays from his earnings and savings (summer and high school jobs, PT work during the school year)
25%-50% of last 2 years: Our son takes out loans


I don't know. I just know if I try to save enough to cover all of it, I'll make myself crazy and I'll neglect the other, more important savings goal: retirement. My spouse will be nearly retirement age when DS goes to college, so we've got to focus on that for the next several years.

I think it would be actually quite healthy for him to take out some loans, so he values the investment we're all making in his education. But I don't want him to think he has to sell his soul to the highest bidder when he's looking for a post-college job just because he owes hundreds of thousands of dollars. And I also don't want him to have to delay the milestones of life too much because of loans--a relationship or marriage, kids, travel (within reason), going on to get a master's degree if he wants/needs that, buying a house, saving for his own retirement. I'd like to see him debt-free some time in his twenties so he can move on with his life.

We'll see if I can pull that off.

[TBH]

I forgot all about scholarships and tuition remission. I work in higher education, so I may be able to get a job that will pay for a portion of his education even if he doesn't go to the school I work for. But I'm not going to bank on that, because I think those deals are probably going the way of the pension and the dinosaur, and DS won't start college til 2021 or thereabouts.

As for scholarships, I really hope he gets some, but I'm not counting on it. I myself got great scholarships for grad school. Less for undergrad--I think I had a scholarship my last 2 years of undergrad for 2K each year. It was great free money, but not enough to make me count on my son getting the same thing.

[Ima saver]

The biggest mistake parents make it to save for college before saving for their own retirement. You can borrow for college, you can't for retirement.

[Bluezy]

I opened CJ's 529 in January that is linked to my UPromise account. A percentage of the cost of certain items I buy is deposited in to his 529 quarterly. Along with my monthly contributions we are looking at around $2k a year. CJ is 2 1/2 years of age. I imagine that will take care of a large portion of his university expenses, but he will have to begin his own monthly contributions when he reaches working age.

There is no reason why CJ, or any child of working age, cannot work to contribute towards his/her educational fundings.

[asmom]

Originally Posted by claire

I envision something like this:

25%: His dad and I pay out of pocket
25%: Our son pays from his earnings and savings (summer and high school jobs, PT work during the school year)
25%-50% of last 2 years: Our son takes out loans

I've been thinking of a slightly different formula. I was thinking about:

50%: me and my husband
25%: the kids contribute from earnings and savings
25%: the kids take out loans or even hopefully scholarships but I am not depending on those at all.

Now the trick is to figure out how much schooling will cost in 5 years (for my daughter) or 11 years(for my son).

[Dixiechick]

My ex and I bought the Pre-Paid Affordable College Tuition packages for both of our kids. Combined they were about $15k (now they are listed at about $20k per child!). But, all their tuition is paid for if they go to an in-state college (which my daughter is doing). It pays for 138 hours of tuition. She then got athletic scholarships and academic scholarships that will pay for room, board and books with cash left over that she will get for whatever. For her athletics, she's required to live in the dorms the first year, but after that, she can either find someone to split an apartment with or move back home (we're about 45 minutes driving distance to the school). If she moves back home, all the money from her scholarships will be cash in her hand for whatever expenses she has. I'd check and see if your state has the PACT program. It's guaranteed to pay for the tuition...

Dixiechick

[Snoopy2645]

Well we put a little away each week for the kids funds I told dh its so they can get a car so they can get a job so they can pay thier own way into college!! I will help though I will let them live at home & stuff like that I work with a women who works 3 jobs to pay for her kids room & board no way am I doing that I think the kids can work some too KWIM

As for life ins I have 100k policy I pay for & its to be left to my kids if I die. Dh has life ins for me threw his work plus he would get so much a month for the kids if I died so I figure that would be enough.

[cschin4]

I think Life Insurance is very important if you have kids. I have a 500k term on both myself and my husband. I want my kids to be cared for and financially OK if something would happen to either or both of us.